Western Midstream Partners operates a significant portfolio of midstream assets across key regions in the United States, including the Rocky Mountains, North-central Pennsylvania, Texas, and New Mexico. These assets are crucial for the gathering, compressing, treating, processing, and transporting natural gas, as well as for the gathering, stabilizing, and transporting of condensate, natural gas liquids, and crude oil. The partnership also engages in gathering and disposing of produced water for its customers.
The potential sale comes at a time when midstream valuations remain high, partly due to capacity constraints and increasing U.S. oil exports. Occidental is reportedly working with investment bankers to auction off these assets, hoping to fetch more than $5 billion. This move is not only aimed at freeing up capital for further investment in its core operational areas but also at alleviating the significant debt load Occidental assumed following its acquisition of Anadarko.
The decision to consider selling Western Midstream underscores the challenges many oil companies face with the capital expenditure required to maintain and expand U.S. pipeline infrastructure amidst bottlenecks. Other companies, such as Hess Corp and Oasis Petroleum Inc, have also recently opted to sell or spin-off pipeline assets, taking advantage of favorable market conditions for these types of assets.
For Western Midstream, the company’s performance remains strong, with a positive outlook for its operations. In its third-quarter 2023 results, Western Midstream anticipates its Adjusted EBITDA to be towards the high end of the previously announced guidance range of $1.950 billion to $2.050 billion. This optimistic projection is bolstered by growth experienced in the third quarter and expected contributions from the Meritage assets.
As Occidental evaluates its strategic options, the potential sale of Western Midstream could significantly impact the midstream sector, providing insights into the valuation of pipeline assets in the current market and Occidental’s approach to debt management and capital allocation moving forward. This strategic move is being closely watched by industry analysts and investors alike as it may set precedents for similar transactions in the oil and gas industry.
